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Palestinians say Israel is costing them $4bn a year

The report argues that restrictions on access to natural resources have shrunk the economy of the West Bank and Gaza to little more than half of what it could be

Palestinian leaders yesterday charged that Israel’s occupation is costing their economy at least £4.35bn which could otherwise be used to ensure a healthy fiscal surplus and end their chronic dependence on foreign aid.

A detailed 35-page report published by the Palestinian Authority (PA) argues that a series of non-security related restrictions on access to natural resources, including water, Dead Sea minerals and farmland, have shrunk the economy of the West Bank and Gaza to little more than half of what it could be.

Contrary to previous criticisms that the 43-year-old occupation damages Israel's economy because of the huge military costs of maintaining it, the report argues that Israel has gone out of its way to exploit Palestinian resources for its own benefit while imposing constraints designed "to prevent any Palestinian competition with Israeli economic interests".

Hasan Abu Libdeh, the PA's national economy minister, said yesterday: "This is the cheapest occupation in the world."

Mr Abu Libdeh said the price tag of the occupation was one of the reasons why its leadership had decided to pursue its bid for recognition at the UN.

"It should be clear to the international community that one reason for Israel's refusal to act in good faith as a partner for peace is the profits it makes as an occupying power," he said.

The report, compiled by Mr Abu Libdeh's department and the Applied Research Institute in Jerusalem, with the help of consultants funded by the UN, found that Israel uses 10 times as much of the water from West Bank aquifers as the Palestinians.

Mr Abu Libdeh said that while 620,000 Jewish settlers in the occupied territories, including East Jerusalem, cultivated 16,000 acres of irrigated agricultural land, four million Palestinians in Gaza and the West Bank cultivated 25,000 acres. The report argues that charges for water and electricity are up to 50 per cent higher for Palestinians.

Among a comprehensive list of other examples, the report says that Israel maintains control of West Bank mining and quarrying – an industry with a potential value of $900m a year. Exploitation of minerals and salts from occupied territory along the Dead Sea, meanwhile, is estimated to be worth about $150m.

Ahava, an Israeli cosmetics manufacturer using Dead Sea products, is an internationally-known brand. The report also says it is losing $143m in Dead Sea tourism.

While the report accepts that a smaller part of the lost economic activity is justified by Israel on – often highly disputed – security grounds, it estimates that the bulk of around $4.5m – or 56 per cent of the Palestinians' actual GDP – is lost to Palestinians simply through lost revenue or higher raw material costs because they are prevented from accessing their own resources.

The report argues that its cost estimates are conservative because they concentrate on accessible data. For example, it does not take into account losses from tourism to Bethlehem or East Jerusalem, or from the long-standing security prohibition on imports of potentially "dual use" lathe machines, which it says has "probably stifled the development of the whole Palestinian manufacturing sector".